Central Banks Making Risky Bets on Global Economy

12/12/2012 9:51AM

The world's major central banks are embarking on an aggressive new phase of policy activism, a course fraught with economic and political risks. WSJ's Jon Hilsenrath reports on the News Hub. Photo: AP Images.

This transcript has been automatically generated and may not be 100% accurate.

... the the ... welcome new sub at the beest live I'm Simon Constable ... the words world's major central banks are making some big risky bets to stay in the world economy ... to get together once every two months in Switzerland to discuss how they can avoid any calamity Wall Street Journal reported on Hell's mouth joins us now from Washington to discuss this ad shown that great taste I ... aam and that this isn't just a story about a day now because it is they do have a fancy Dan out that it's more a story about what's going on has some of the first thing we've we need to one ... another is whether the debtors are are pretty interesting but is there are no among the most secretive events that happen in the world of central banking on the same story today ... the top central bankers from the Fed from the ECB and Bank of England The Bank of Japan the People's Bank of China ... maybe once every two months of the top of the building in Basel Switzerland ... no staff ... no man knows nobody taking notes ... and they just talk about what's going on in the world and how their how they're addressing it this is really where the rubber meets the road ... I in the world of ... central banking ... so did ... John these risky bets will make him of course talking about maybe unprecedented amount of money creation that what was saying around the well that this isn't a game of these risky bets of very serious and they discussed ... now ... to avoid any on swore consequences right tells about that ... well so I you know one thing is this really interesting day that I think of that in this story is that there's a lot of disagreement among the world's central banks that ... there has been a lot of disagreement about how to proceed ... I'm in a world of very slow growth ... and really on balance work with emerging markets are growing faster than developed markets ... you know at the secretive dinner that we talk about in their phone calls in the more open discussions ... there's a lot of angsty and back and forth about what they should do and a lot of ... it I think the real appreciation ... that they're taking chances and doing a massive global experiment ... that doubt that for which they don't know the outcome I and we won't know the outcome for several years only been maybe we one of the outcome until it's too light John M and I think that's the big worry is that well ... the worry was awarded the institutions that we spend a lot of time in the story talking about is the Bank for International settlements ... that's where the secret dinners take place that I'm on the central bankers ... and that that the economy is there are actually very skeptical of the decisions that the central bankers themselves are taking ... the Denver Nanking is of the world ... and the other central bankers running that takes the the the major institutions in the developed world ... they they have no idea how this is playing out if they could manage the risk the very mindful of the race ... but they think they can manage it they think that someday they can ... a Levin show in dollars the top ... eleven trillion dollars into the financial system than forty years ... they think that they can go out someday when the economy gets back on its feet again ... but as as a citizen of said ... Dariusz is can a very big undertaking when that moment comes he added in Britain will be a very big undertaking now being one of the implications of this or mislead you and me on Main strain I'm ... you know when we yet well together the bank stuff like that ... well the implications are helpful for the franc is really driven by his reading of ... the lessons of the Great Depression and you know in his view is that that that that weren't doing ... what it's doing and of course today as you mentioned earlier ... are probably on as they're doing more of more bond buying ... during his view is that they were doing these things we would see something more like the great depression with much higher unemployment ... more banks failing and more Americans suffering ... from ... one of with John one one of the things that I'm I passed a bank isn't bad is that I'm the one the Fed comes to reverse this and the Fed is office the the ... the fifth of the most important central bank and in the world when it comes to reverse its bond buying program will do that through Wall Street ... the Wall Street right now does not have the capacity to take all those orders ... eleven from the lows of points right ... so that's a problem as well ... I agree with that starting on Tuesday tell all yes all yet to do ... is look that yields on ten year Treasury notes their one point six percent the Fed has been buying a lot of ... they're clearly not the only buyer and how do ... you know the world other major central banks to particular in emerging markets are huge buyers of Treasurys ... I insurance company's other investors had been gobbling this top up ... this clearly a lot of demand in the global financial system right now ... for of for for Treasury bonds ... you know someday maybe there won't be if there's a fear of inflation ... but right now it's hard to say that there isn't capacity out there ... to gobble up some of these bonds in defense of his line ... of travel ad that's that's the studios wouldn't be so what I'm saying is you wouldn't be so low ... that there was a lot of demand for the securities that started ... Campbell and that's that's a very good to narrow allowed